Question

*Confusion*
Rita promises to give her 12-year-old daughter $12,000 when she turns 18. How much does she need to put in the bank now if the interest rate is 12% per year?

Answer 1

does it mention anything about compounding interest?

Answer 2

No

Answer 3

hmm frustrating, it could be compounded monthly or annually (or maybe something else)

Answer 4

I tried using both future and present value but neither of them gve me an answer i can choose

Answer 5

oh you're given a list of choices? maybe that will help me figure out what they want

Answer 6

sometimes they think students are mindreaders which is frustrating

Answer 7

6079.58
5248.19
6502.12
is what they give me

Answer 8

its very frustrating

Answer 9

ok so through trial and error, I figured out they are using compound interest with the interest being compounded 1 time per year

Answer 10

do you know the compound interest formula?

Answer 11

that may be why, I'm not familiar with it lol

Answer 12

the formula is

\[\Large A = P(1+r/n)^{nt}\]

In this case,

A = 12000
P = unknown
r = 0.12
n = 1 (compounding 1 time per year)
t = 6 years (difference from 12 to 18)

Answer 13

i will have to note this

Answer 14

so plugging all that in gives
\[\Large A = P(1+r/n)^{nt}\]
\[\Large 12000 = P(1+0.12/1)^{1*6}\]
\[\Large 12000 = P(1+0.12)^{6}\]
\[\Large 12000 = P(1.12)^{6}\]
You keep going to solve for P

Answer 15

thank you thank you thank you so very much :)

Answer 16

you're welcome